Richard Rushfield talked to some Hollywood execs about what it’s like in the office after a movie bombs. Awkward, is the gist of it. (“I remember one time we came back the Monday after a big flop and nobody talked about it. There was no analysis of what we can do better, what we could do different. We had our Monday meeting, and, the crazy thing in the room was, no one spoke about it.”)

The alternative to not talking about it is finding a fall guy:

“For any movie to do well or not, a whole bunch of variables have to work: you have to luck out with your release date – you don’t want to come out right after Harry Potter. Are you marketing to right audience, spending enough? Spending in the right places? There are so many different elements, but that’s at odds with everybody’s desire to have a quick pithy reason why something didn’t work. It’s in everyone’s interest for the finger to be pointed at one culprit.”

How do you deal with failure in your workplace? I tend to think everything is my fault, so that’s how I deal with it: I make it all about ME.

You have to hand it to the Academy—there’s hardly a higher profile way to draw attention to the plight of the Visual Effects industry in Hollywood than playing the theme from Jaws before cutting off an Oscar-winning VFX veteran explaining how fucked VFX is. If the famously-overbudget movie was remade today—or, rather, WHEN it is remade—Jaws would have a CGI shark that will be largely animated overseas, by a huge company that underbids on its budgets, doesn’t pay artists on time, and is perched on the edge of repeated bankruptcy. That’s the way the industry is built now, and the question should really be: How bad does it have to get before we figure out how to fix it?

While I’m not a VFX artist, I know many of them working in Hollywood, including some who were at the 400-person protest outside the Oscars. They’re protesting because even as more and more tentpole movies rely on big budget effects to top the box office, the studios remain well and utterly insolvent. Two of the biggest effects studios declared bankruptcy in the past year—Digital Domain, who by my back-of-the-envelope math are responsible for 85% of all explosion special effects in Hollywood, and Rhythm & Hues, who just won an award for Best Visual Effects on Sunday.

As Rhythm & Hues’ Westenhofer tried to say, before being unceremoniously chewed up and spit out, the VFX industry is in the middle of a race to the bottom. While budgets for effects look huge, they … well, aren’t, really. The time and manpower involved in a VFX tour de force like Life of Pi is absolutely insane. Months of preproduction, months more of production, and a VFX team of over 600 artists are involved. (For those without calculators, paying 600 people $50,000/year for six months of work costs, um, 15 million dollars. Oof.) While a lot of artists point to outsourcing as the problem, it’s hard to figure how that leads to VFX studios blowing budgets so badly.

The answer lies in how VFX work is billed. It’s closer to a defense contract than anything else. Multiple studios compete against each other, bidding on work on a limited number of massive films, each trying to undercut the other without strangling themselves on shoestring budgets. Once those budgets are in, it’s hard to change them—which means that it’s hard to come back later and say “that CGI tiger you wanted is gonna be harder than we thought, and also we have to pay overtime.” So studios push back on one of the easiest places to push: Their artists.

Artists will regularly not get paid overtime, even when working 15-hour days and weekends. Studios will renege on contracts, just to see if they can. Companies will hold back payroll for as long as possible. In the wake of Rhythm & Hues’ bankruptcy, there are rumors swirling that they’re refusing to pay for healthcare benefits for employees. I’d call these horror stories, except they’re so commonplace that both “horror” and “stories” seem like inappropriate words to use.

In an interview after winning Best Director, Ang Lee said he wished that VFX weren’t so expensive. Well, sure. No doubt he also wishes post-production, pre-production, film stock and actors were cheaper, too. But while he suggests that the costs are for research and hardware, the number one place to put pressure on budgets is the people doing the work. This isn’t anyone’s “fault,” it’s the inevitable result of an industry that is more interested in getting big, exciting work than in paying on time. There are too many people, in both management and in the lower level positions, who are willing to break their backs bending over for film studios.

A concept artist friend gchatted me while I was writing this, saying he was reconsidering the VFX industry entirely. But there will never be a shortage of new art school graduates willing to put up with anything to work on movies. Full Sail University, a for-profit school that cranks out animation-ready artists, graduates thousands a year. Animation Mentor, an online-only school, does the same thing for character animators. The pool of people willing to do anything to keep their jobs just gets bigger and bigger. In fact, last year Digital Domain announced an initiative to effectively charge students to work with them. What would in the past have been an unpaid internship was transformed into a negative-pay internship.

VFX blog VFXSoldier managed to get ahold of audio of Digital Domain’s CEO explaining this new business model:

Now this was the controversial element of this and the first discussions with the Department of Education, [‘cause] it sounds like you’re taking advantage of the students. But we were able to persuade even the academic community, if we don’t do something to dramatically reduce costs in our industry, not only ours but many other industries in this country, then we’re going to lose these industries

In other words, we have to force students to subsidize the industry, or it will go away. Unsurprisingly, Digital Domain declared bankruptcy within a year.

So what do we do? How do you keep an industry from collapsing when there’s so much pressure from the upper management to slash costs, and from the artists themselves to keep from rocking the boat lest they get thrown over for fresh meat?

A union would do it, if it could get up and running. Every other film trade has a dedicated union that defines how overtime can work, how high wages should be, whether work can get sent abroad. VFX artists don’t, leading to awful hours and late pay. But getting one in place might be hard when the industry is already suffering. The other angle would be for management to actually stand up against the clients—which maybe makes me sound like a snide asshole, but I’m not! There are only a half dozen major film studios paying for big effects. Pissing one off would be enough to end a struggling studio.

But that’s what’s going to happen anyway. We’re careening towards the VFX industry’s Great Recession, with companies failing left and right and all of us forced to confront a world where effects are considered a product, something you pay a flat fee for and complain if it doesn’t work, instead of a service, something collaborative between artists and directors, where the pay is based on value added instead of who can bid lowest. If management can shift their attitude, then maybe there’s hope for turning around before the entire field crashes and burns and has to be rebuilt from the ground up.

Christian Brown doesn’t do Visual Effects work because he doesn’t have the patience. // photograph by neonmarg

At this point, the movie, with a price tag now said to be north of $170 million, needs as many as five weeks of complex reshoots, which are not expected to get underway until at least September. Paramount has taken the unusual step of hiring Prometheus scriptwriter Damon Lindelhof to rework the film’s third act. The studio announced in March that it was moving the film to June 2013 from December.

—The Hollywood Reporter’s chronicle of production gaffes in Brad Pitt’s World War Z is a good reminder that throwing money at a problem doesn’t always fix it!

Basically: All things that could go wrong have gone wrong! But luckily, says one source, “It’s a great first 45 minutes, maybe even an hour.” I’d pay $5 to see one good hour of a really bad movie.  What would YOU pay (WWYP) to see 45 minutes of Brad Pitt valiantly fighting off zombies? Ester and Adam? Help us out here.